What is Title? Encumbrances, Title Insurance and What They Mean for You
Title is your legal right to own, use, and sell property. Understanding what can cloud that title and how to protect yourself is essential knowledge for any property buyer or owner.
What is Title?
In property law, title refers to legal ownership of real estate. When you purchase a property and the transaction closes, legal title is transferred to you and registered on the public land register in Ontario, through the Ontario land registration system accessible via Teraview. Holding clear title means you have the unencumbered legal right to own, use, lease, mortgage, and sell the property.
What is an Encumbrance?
An encumbrance is any registered interest, claim, or right against a property held by someone other than the owner. Common types include:
Mortgages and Charges
The most common encumbrance. When you borrow money to buy property, the lender registers a mortgage (called a "charge" in Ontario) on title as security. This must be discharged removed when the loan is paid off. Outstanding mortgages must be paid out on the sale of a property.
Liens
Construction liens can be registered by unpaid contractors under Ontario's Construction Act. The CRA can also register tax liens against property for unpaid taxes. Both must be cleared before a property can be sold with clean title.
Easements
An easement is a right held by someone else often a neighbour or utility company to use part of your land for a specific purpose, such as a right-of-way to cross the property or an easement for utility lines. Easements run with the land and survive a sale they bind every future owner.
Restrictive Covenants
A restriction registered on title limiting how the property can be used for example, prohibiting any structure above a certain height or restricting use to residential purposes. Also run with the land.
Writs of Execution
If someone has a court judgment against the property owner, a writ of seizure and sale may be registered, which attaches to real property and prevents a clean sale until resolved.
What is Title Insurance?
Title insurance is an insurance policy protecting against losses arising from title defects including ones that existed before you purchased the property. It is purchased once at closing and remains in effect for as long as you own the property.
Title insurance typically covers:
- Errors or omissions in the public title register
- Fraud and forgery (e.g., a fraudulent discharge of a mortgage or a fraudulent transfer)
- Undisclosed easements or encumbrances not found in the title search
- Survey issues (e.g., a structure encroaching on a neighbouring property)
- Liens for unpaid construction work done before you purchased
- Zoning violations and building permit issues (depending on the policy)
Title Insurance vs. a Title Search
Title insurance does not replace a lawyer's title search it works alongside it. Your lawyer still searches title; title insurance covers risks that were missed or not discoverable at the time of search. In Ontario, most residential transactions use title insurance in lieu of a survey (for cost efficiency), but the lawyer's title search remains essential.
Title Fraud
Title fraud occurs when a fraudster forges documents to mortgage or sell a property they do not own typically targeting properties free and clear of mortgages. Title insurance covers this risk. You can also register a title protection alert through services that notify you if activity is recorded against your property's title.